Payment methods and distribution of the Making Work Pay Tax Credit
Making Work Pay Credit (MWPC) as noted in a previous blog post is a refundable credit available in 2009 and 2010 worth 6.2% of earned income up to $400 ($800, MFJ) for taxpayers with a valid for work social security number. You cannot be a dependent of another taxpayer or identified as a non-resident alien. If you receive earned income as an employee you more than likely began receiving this credit beginning in April, 2009 as a reduction in the amount of federal income tax withheld from your paycheck; though not large, an amount was proportionally reduced so that your net pay was greater than what it had been at the beginning of the calendar year. If you completed the IRS Form W-4 in 2009 using single withholding status, the total tax withholding for 2009 would have been reduced by $400 (those using a married withholding status, $600).
Form 1040, Schedule M, Making Work Pay and Government Retiree Credits, is a new form in 2009 that must be filed by eligible individuals claiming MWPC on Forms 1040 or 1040A. IRS Form 1040EZ filers enter MWPC directly on the 1040EZ form; they do not file the additional Schedule M. The MWPC is not considered taxable income by the Federal government. Similarly, it is not used in the determination of eligibility for federal program benefits or assistance.